Quote from: MahaRamana on March 30, 2014, 05:16:32 PM

Quote from: foody on March 30, 2014, 03:28:40 PM

Hey,

I'm just jumping into this so let me know if these points ( http://www.macrobusiness.com.au/2014/03/bye-bye-bitcoin/ ) have been refuted elsewhere.

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This would be a serious blow, since roughly 60% of global Bitcoin trading occurs in China. Bitcoin prices fell by almost 10% today.

Do we have these figures? How credible is this?

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The IRS ruled that Bitcoin and other virtual currencies are property, not currency... they are subject to capital gains taxation ... This means Bitcoins are not fungible, and that makes it unworkable as a currency. If I have to figure out which particular Bitcoin in my wallet I want to spend and what the tax treatment will be, Bitcoin just doesnt work as a commercial medium of exchange. Bitcoin still works as a speculative medium, but Bitcoins claim has always been to being more than the latest iteration of the trading sardinesit aspired to be a commercial medium.

Assuming BTC is no longer a viable medium of exchange, what future utility can be offered by bitcoin. Are we banking on future stability? I still haven't seen an argument underlying the fundamental utility of BTC assuming continued volatility. I know the primary focus here has been short term technical analyses, e.g. user adoption. I want to continue investing during these lows but based on the [little] information gathered, the political and legal landscape seems to be growing more turbulent. These are being considered? Are you figures being updated to account for these things? Do they not matter? Can someone summarize the current view/data contributing to the long term bullish sentiment?

I'm a noob to the forums so any help/guidance is appreciated.

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Assuming BTC is no longer a viable medium of exchange, what future utility can be offered by bitcoin

There are two things to distinguish : bitcoin as a payment technology and bitcoin as a unit of value. These are two completely different things and most of the confusion in the media and in the mind of people is linked to the fact that we have named the platform/ecosystem and the "system units" with the exact same name.
The author of the bye bye bitcoin article assumes that bitcoin needs to be used as a unit of monetary value to have a commercial role, which is absolutely not the case.
Good and services can be denominated in FIAT currency, but bought through a web of services that are built on the bitcoin technology rather than through Visa Mastercard for exemple.
Where this leads us is that bitcoin will not be used that much as a direct payment unit by the masses. In such scenario, we would not see prices denominated in bitcoins and people paying from their personal bitcoin wallet due to the non-fongibility concerns created by authorities like the IRS.
However, we can still see the huge development in the use of the bitcoin technology in the context of exclusive FIAT denomination of goods and services and exclusive FIAT denomination of the funds of the consumer. This is what is completely missed by that Georgetown law professor who mixes the bitcoin technology with the unit of monetary exchange function.
What must be understood is that each bitcoin is nothing else than a piece of the bitcoin system. Wether individual consumers need bitcoin or not to make payments is not very relevant if they are going to use a service that does use bitcoin. Because in that case the bitcoin will need to be held by the companies who operate the services that are based on the technology. If large volumes are traded on services that are using this technology, the bitcoin value will have to reflect in FIAT value, the FIAT value of these trading volumes.

Bitcoin is growing up from a gadget that people are sending directly between themselves to being a payment system technology. Claims that the technology is not suitable are based on the current experience based on the current ecosystem in which there are almost no big companies offering user interfaces, offering insurances, hiding the complexities at technical, fiscal, legal and all other levels.

Imagine for exemple the application of the "pay for online content" use, where website and content providers can ask the payment of a fee for a direct access to their content wether it is a single article, a video or whatever. Today they have to do it as a recurring monthly fee because most people would not bother going through a purchase with credit card to pay a few cents and the transaction fees would not make it possible. But if people know of a company who is managing this, you just install a browser plugin, you have your credit card linked with your account with that company, and that company gives you access to all the content, automatically deducting your account of the few USD cents. What happened behind the doors ? There was a bitcoin based transaction at the moment you authorised your browser plugin to charge you a fee for that content : the company offering you that browser plugin will send bitcoin to the company having the deal with the content provider. But wether you are the content consumer or the content provider, you are not concerned about it. Only the company offering the service to you and the company offering content providers to be paid will be using the technology and will have used a portion of the 12 million BTC "system units" in existence to reflect the monetary value of the transaction.

So, no. BTC will not replace USD or EUR in the monetary denomination because it cannot be a monetary unit. It's volatility and non-fungibility in some countries make it impossible. It is rather a share of the usability of an ecosystem. Even if the analogy is far from complete, we can say that you don't need a Facebook share to use Facebook. Yet the facebook share value reflects the amount of users that are using the platform. If it was misunderstood that one had to actually buy Facebook shares to open a Facebook account and use the platform, it would be easy for experts to claim that this social website would not work. Not because the social website could not function, but because of their misunderstanding.

What we are seeing right now is the death of the dream of the new universal monetary unit that some imagined BTC would have become. At some higher level it will always be a unit of exchange, but not for the masses. At the same time, after a technological breakthrough, we are witnessing the birth of an ecosystem of services that would offer tremendous value to a big portion of the population. Today, it seems that this ecosystem is going to be built on 12 million "system units" or "shares" called bitcoins, which is what gives them a speculative and theoretical value far beyond today's value.

The value of Bitcoin must go down for all that it cannot and will not be. Similarly, it will go up for all that it can and will be.

So this renders all of the speculation regarding mass adoption rate null. In the hypothetical you offered wouldn't fongibility still be a significant issue considering capital gains? Does your funds transfer theory of btc assume significantly less volatility? We know that the minting rate decreases over time and that demand will eventually taper off as well. How do we know there will be an acceptable rate of deflation? Won't any deflation require deduction of capital gains for each transaction? Is this not an issue or did I misunderstand something?

In terms of investing, is it possible to estimate a value for that hypothetical market? Shouldn't we shift our focus to determining the utility as a medium for efficient transfers. The current fervor has assumed adoption on an epic scale. Would this not lead to a massive price correction, or are there non-apparent price floors at play?